Compound Opens Institutional Market With 87% LTV

Compound Foundation has opened a USDC lending market that takes ETH, wstETH, WBTC and cbBTC at loan-to-value ratios of up to 87%, three weeks after relaunching the protocol around institutional credit.

The Institutional Market is the first product out of the $52 million program COMP holders approved in May, and it went live under multisig control that Compound governance cannot revoke. A delegate has asked COMP holders to change that. The Compound Governance Working Group says the arrangement sits within the program the DAO already approved and that moving control to governance is the intended outcome once the market's research phase ends.

The market lends USDC against ETH, wstETH, WBTC and cbBTC, and runs on Compound v3. Compound holds $1.53 billion in total value locked with $638 million borrowed against it, sixth among lending protocols on DefiLlama and up 23% over 30 days. Ethereum carries $1.42 billion of that, or 93%. COMP trades at $20.88, up 9% over seven days, for a market cap of $212 million.

"With today's Institutional Market launch, we are taking the first step toward building infrastructure to meet institutional client demands, including better capital efficiency, clearly defined risk, and a much higher standard of service," said Aaron Schnarch, executive director of Compound Foundation. "We are encouraged by the market demand, and look forward to launching additional capabilities over the coming months."

Oversubscribed At Launch

Compound says the market was oversubscribed on day one, with DeFi Saver, K3, KPK and Yearn taking part. The company gave no figure for how much was subscribed.

"Compound is combining the capital efficiency of onchain markets with the level of service institutional participants expect. The ability to access more efficient borrowing while working directly with a team that understands institutional requirements makes this a compelling new market for us," said Marcelo Ruiz de Olano, co-founder and CEO of KPK.

Four Assets, One Borrow

The collateral list is short and liquid: two forms of ether and two forms of wrapped bitcoin.

Compound's argument is that a market holding only those four assets can run higher loan-to-value ratios than one that has to price the tail, and that lenders capture better economics as a result. Borrowing is open to anyone. The approval process and a 100,000 USDC minimum deposit apply to the boosted supplier rewards, which run to 200,000 USDC paid pro rata over three months against a $20 million supply cap.

Compound's market page puts ETH at an 87% loan-to-value ratio, wstETH at 85%, and WBTC and cbBTC at 81%, with a $10 million borrow cap on each. Liquidation factors run from 93% on ETH to 86% on the two bitcoin assets, and liquidation penalties from 5% on ETH to 10% on WBTC and cbBTC.

The Foundation identified the market to delegates in July as the first V4 research-and-development comet, built under what it calls v3.5 and not part of the original roadmap, with the work funded inside the V4 program. Compound also says v3 has run four years without an exploit, a claim worth stating as the company's own.

Who Holds The Keys

Compound delegate ugurmersin asked COMP holders on Sept. 9 to put ultimate control of the market under Compound governance, writing that the DAO "does not currently appear to have ultimate control over Institutional Comet" and that he could find no governance authorization for the structure or any way for COMP holders to revoke it. The proposal would leave day-to-day operation where it is while requiring the administrators to publish a full permissions map and transfer ultimate authority within 30 days.

The Compound Governance Working Group answered the same day with a permissions map. Risk parameters, collateral listings and reserve withdrawals sit with a 3-of-4 Safe whose signers represent the working group, the DAO's security service provider team, Gauntlet and the Foundation. Contract upgrades run through a proxy admin owned by a 4-of-7 Safe drawn from the same four entities. Emergency pause sits with Compound's existing 5-of-9 guardian, which covers every other market the DAO runs. In a DAO-controlled comet the first two layers sit with the governance timelock, the group wrote; here they do not, and approval of the program "should not be confused with a technical ability for COMP governance to revoke those permissions directly."

The group said it does not support the proposal's 30-day transfer deadline, and that the configuration layer has to move quickly while the market iterates on collateral, caps and parameters. On Sept. 10 it wrote that the form of governance for the comet is still being researched and needs a spec, engineering and an audit, with optimistic governance one implementation under study. It also said the market passed $12 million in collateral and was approaching $10 million in supplied USDC within 48 hours of launch.

The delegate narrowed the ask on Sept. 11: governance should be able to replace the administrators while the Safes keep every permission they hold today. "The Safes operate the market. Governance controls who is allowed to operate it," he wrote, arguing the pattern already exists in the Treasury Management Committee framework and needs no research phase. His stated reason for pressing now is V4 itself, which is due to be built with the same program money.

Mostly Still In Reserve

COMP holders approved the budget on May 8, with 1.88 million COMP in favor and none against, and it executed two days later. The Foundation made it public on Aug. 17 alongside four hires from Coinbase, Anchorage, NEAR and Maple. Schnarch, the executive director, was chief operating officer of Anchorage Digital and chief executive of Coinbase Custody. The two-year budget runs $28 million for operations and $24 million for growth, but only $14 million went to the Foundation's multisig; the other $38 million sits in reserve against milestones that include a staffed engineering team and a production v3 integration kit.

Shipping an institutional product three weeks in is the first of those milestones met in public. Whether the remaining $38 million follows is a DAO decision, not a Foundation one.

The $480 Billion Line

Compound's boilerplate puts the protocol at "approximately $480B in deposits and borrowing volume" since 2018. Compound sits behind Aave's $17.5 billion and Morpho Blue's $9.6 billion in a lending category holding $50.2 billion across 639 protocols, with 3.1% of the total.

Compound wrote the template for onchain lending in 2018 and now holds less than a tenth of Aave's deposits, and the institutional market is its attempt to win back size on terms and service rather than rates. Compound calls it the first in a planned series built around different collateral types and borrower profiles.

CORRECTION: Borrowing is open to anyone and approval applies only to the supplier rewards; COMP holders approved the program in May and the Foundation made it public in August; the participant is K3. The has also been updated with the Compound Governance Working Group's account of the market's control structure and funding mandate, published on Compound's forum on Sept. 9 and 10, and with the exchange that followed.